Why might the goodwill calculated by different methods differ?

Different methods use different variables and assumptions

The goodwill calculated by different methods can differ because each method uses different variables and assumptions in its calculation. The methods for valuing goodwill, such as the Average Profits Method, Super Profits Method, and Capitalisation Method, have their own distinct approaches and criteria. These methods may consider factors such as past profits, projected future profits, industry averages, capital investment, and other variables. Additionally, they may make different assumptions about the firm's growth rate, risk, and expected returns. Due to these variations in variables and assumptions, the resulting calculations of goodwill can differ significantly. Therefore, it is important to carefully select and apply an appropriate method based on the specific circumstances and characteristics of the business being evaluated.